CIBC Research discusses BoC rate call and CAD outlook. CIBC targets USD/CAD at 1.33 by year-end.

"We’re sticking with our call for a lone quarter point cut from the Bank of Canada, and while we merely nudged that a month earlier (to December), market expectations have swung more wildly, initially having bet heavily on an October cut, but subsequently dropping odds for a cut at all this year. The Bank’s statement and a follow-up speech didn’t hint at imminent action, arguing it had anticipated a slowing global climate in ending its rate hikes at lower levels than the US. In response to the BoC and strong jobs data, the C$ caught a bid as the probability of an October move was reduced. But a rate cut either delivered or strongly hinted at in December should see the dollar-Canada hovering near 1.33 at year end and into H1 2020. Canada’s current account deficit narrowed by more than expected in Q2, helped in part by a surplus for investment income. But over the medium-term, we see enough disappointments on trade to keep the current account in the red, and a negative for the C$. Look for a depreciation in the C$ over the course of 2020 and into 2021, reaching 1.38 by Q4 2020," CIBC adds.